Buying your first home is a big deal and most likely the most expensive purchase you’ve ever made. That’s why we wanted to take the time to piece together a guide for all of you first-time home buyers.
Before we get into it – we wanted to discuss just how many first-time home buyers there are right now. In 2019, 33% of buyers were first-time home buyers. One thing we’ve found is that many of our clients don’t think they can afford to buy a home while they’re still paying off their student debt, but that’s not always true.
While every buyer’s situation is a little different, many are buying homes with quite a bit of student debt. In fact, last year 47% of buyers aged 21-29 with debt reported having a median student debt balance of $21,000. Similarly, 42% of buyers aged 30-39 with debt reported having a median student debt balance of $30,000.
That’s quite a few buyers with significant student debt! Now, let’s discuss some fundamentals you should know when buying your first home.
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Choosing to buy
While the decision to buy is entirely up to you and your family, we’ll share a few things to consider before finalizing your decision. Consider the city or area that you’re looking to buy a home. Can you see yourself there for the next 5-10 years? And before deciding on a specific house, be sure that it will fit your family’s needs for the foreseeable future. Planning to expand your family? Make sure you have enough bedrooms and bathrooms to accommodate everyone.
There are many factors that go into deciding to purchase a home. Below are some indicators that you are financially ready to purchase a home:
- You’re out of debt
- You have an emergency fund saved
- You’ve saved up for a down payment
- You have good credit
Getting prepared early
We cannot stress this enough. You need to get pre-approved early – especially when buying a home for the first time. One of the biggest reasons we stress this is because you need to know what you can afford to buy. If you begin house hunting online with a preconceived notion of what your price range will be, you could fall in love with a home you can’t actually afford. Not only that, but being pre-approved before looking lets your realtor and sellers know you’re a serious buyer, and can lead to a quicker closing.
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Amount of money needed
The actual amount of money needed to buy a home depends on factors such as what type of loan you choose and the cost of the house. However, below are a few costs that you can count on paying regardless.
- Down payment – a percentage of the home’s price (some loans require as little as 3% down)
- Closing costs – costs associated with processing paperwork
- Prepaids – costs such as property taxes, homeowners insurance, and mortgage interest
If you’re thinking about purchasing your first home in the near future, we’d love to speak with you. We’re a small mortgage team that has been working together for over 20 years, meaning we have the knowledge to sit down and walk you through the process.
Our online application takes anywhere from 5-20 minutes to complete and we can have you pre-approved for a loan in just a few hours.
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